Return to Office: Four Key Drivers to Watch with the Business of Food
By Karol Aure-Flynn, Food & Agribusiness Industry Advisors, Wells Fargo (October 19, 2021)
The changing face of the American workplace has serious implications for the business of food. It turns out that our mid-pandemic expectations of the return-to-normal are more complicated than originally envisioned. On August 8, The Wall Street Journal detailed the upending of fall plans for corporate America. While economic recovery has gained momentum, new COVID-19 variants are serving up additional challenges to public health and the return-to-the-office. September was a return-to-work target for some, but for many, the plan remains unclear. Just as when the new school year began, businesses of all sizes are scrambling to re-frame ‘re-opening’, and employers and employees are faced with new decisions and habits regarding meals at work and home. That said, for a number of reasons, the U.S. food system will continue to evolve rapidly to meet the emerging scenarios of where, when, and how the workplace is transformed by the unique impacts of COVID-19. We are watching four key developments:
1. Online Ordering and Pick-up
It’s no surprise that the U.S. consumer was forced to abruptly change the way they purchase and consume food during the pandemic. Shelter-in-place orders and restaurant closings forced families to cook at home, stockpile, and shop in new and different ways. Growth in online shopping surged, outpacing even lofty pre-pandemic expectations. As vaccination rates increased, infection rates decreased, and masking mandates lifted in places – Bricks Meets Clicks/Mercatus reported June numbers showing year-over-year declines in overall online spending for groceries from $8.8 billion in June 2020 to $6.8 billion in June 2021. Both delivery and ship-to-home services have also decreased by more than 10 percent over the same period. Interestingly, the Mercatus Shopping Survey also revealed the ‘Likelihood to Use Grocery Service Again’ continues to increase from 56.7 percent in June 2020 to 58.2 percent in June 2021. As employees head out to work, or are returning from work, are they planning on continuing to order online, and doing more pick-ups? Now that emerging COVID variants are again driving both personal decisions to self-isolate and formalized response plans, these e-commerce, delivery, and pick-up services will adapt once again. Online ordering and pick up/delivery services are here to stay, and will likely ebb and flow as consumers juggle their desire for in-person shopping and convenience.
2. Evolving Workplace Models and Continued Trends
With the physical attributes of the workplace changing, including hours of operation and HR protocols, the business of food will continue to change. One shift that is gaining interest is the hybrid model, in order to adjust work hours to minimize crowding. A hybrid model where workers are scheduled to work from home several days a week, or to block office-hours differently, indicates there’s likely to be a hybrid of home and workplace eating, too.
To accommodate hybrid work models, restaurants have changed their layouts and traffic flow to cater to indoor seating in anticipation of workers dining out for lunch. Take-out, drive-through, and office delivery have also adapted. Menus have been simplified to create efficiency for both operations and the consumer-experience. While in-restaurant dining has re-opened in some areas, employees will likely continue to make choices about indoor seating based on their vaccination status, the contagion of new variants, and local recommendations by health professionals.
Travel to or for work is changing. Commuting via personal vehicle, carpools, and/or public transportation may also mean less reliance on the corner kiosk or coffee shop, and/or willingness to eat/drink in close quarters to other people. Air travel for work has probably already shifted. With the proliferation and adoption of virtual meetings, it’s reasonable to foresee that employers may be weighing productivity versus travel expense. As employees travel, whatever the mode, food providers must again be mindful evolving consumer wishes, and how food is packaged and presented at the customer-business interface.
Food provides an interesting interface between home, school, and work. However the physical model of the workplace evolves, personal and cultural preferences drive how Americans eat at school, the office, with customers, and at the family dinner table. A couple of existing trends are gathering momentum from both the pandemic and the evolving demographics and mindset of the American public.
Health and wellness trends have been gaining momentum for some time. Understandably, immune-support products and functional foods gained traction in a year where personal and public health was top of mind. Previous to the pandemic, American consumers were increasingly seeking expanded options, and a willingness to try new foods and combinations. Multicultural mindset is demonstrated by the consumer’s growing interest in diverse food offerings and bold/creative flavors.
3. Kitchen Fatigue
Food-at-home is transforming as innovators create products and services to assist families with meal planning, easy-prep, and simplified recipes. While families may have to revert to more at-home based meals, it’s not likely we’re going to see a rerun of the waves of pantry stocking, bread machine sales, and from-scratch home cooking we saw in 2020. A uniquely human issue and seemingly trivial problem – kitchen-fatigue – is changing purchase decisions. For many households, we see a willingness to purchase new products and services to alleviate both planning and time constraints for cooking at home. Meal kits, either by specialized delivery, or purchased in retail, are an example of consumers paying for convenience. Statista reports that by 2022, the delivered meal kit business will have grown 2.5 times the 2017 numbers to nearly 12 billion in sales. The quickly evolving meal kit market via the major retailers is expected to drive additional momentum to this trend. Quick-Service-Restaurants and others that can pivot to easy order, take-out, and delivery from indoor dining will continue to win in this environment.
4. Focus on Fresh and Convenient at Retail Stores
Some trend reversals in the retail departments may already be pointing towards a renewed focus on fresh food and convenience. Whereas fresh produce volume growth soared during the pandemic, price growth was static. In 2021, there has been some price growth in the fresh produce department, but the decreases in volume cannot be wholly attributed to a resistance to pay higher prices.
Is ‘kitchen fatigue’ also driving Q2 2021 declines in frozen food volumes? Even a steep drop in pricing does not appear to be changing volume declines. Additionally, deli department trends have changed: no longer the only place for sliced meats and cheeses, deli departments often now feature pre-made salads, hot dish options, and condiments. In a normal year, sales and volume growth at the deli may be attributed to seasonality – is this year a window into a consumer that is pre-purchasing for work lunch, picking up a dish to minimize dinner preparation? Our thoughts are that this is another clue that consumers are looking for convenience, fresh prepared, and ease – and are once again changing their behavior to new circumstances.
While it is mind-numbing to see a future of waves of COVID-19 variants that continue to disrupt U.S. homes and workplaces, we are confident that the American agribusiness and food system will continue to adapt to the evolving needs and behaviors of the U.S. food consumer. The creative responses have not played out; whether the public and workplace re-openings feel like a roller coaster, whiplash, or a more gentile ebb and flow, adaptability will surely be a differentiator when it comes to serving a changed American workplace. One thing to recognize is that when shelter-in-place mandates first happened in March 2020, there was understandably a lot of scrambling and emotion tied up in food decisions. For any future wide-reaching crisis, will consumers now feel more comfortable with uncertainty? NielsenIQ data shows that 67 percent of all consumers report they have changed the way they shop due to COVID-19, and this figure is poised for further growth. The American workplace is making adjustments, and food producers, processors, manufacturers, retail, and delivery players are at-the-ready to serve consumers what they need and want in a new era.
 Cutter, Chip. (2021, August 8). Companies Thought They Had Plans for Fall. Now They Are Scrapping Them. Wall Street Journal. Retrieved from www.applenews.com
2 Bricks Meet Clicks/Mercatus Shopping Survey (2021, June)
ABOUT THE AUTHOR
Karol Aure-Flynn is a vice president and sector analyst within Wells Fargo’s Food and Agribusiness Industry Advisory group focused on the Specialty and Non-Grain Crops sector. Aure-Flynn holds an undergraduate degree is from Stanford University and completed her M.B.A. at University of California, Davis with an emphasis in finance and agricultural management. Reach her at Karol.Aureemail@example.com or via LinkedIn.
* Opinions and information included in this article are general and not intended to provide specific advice or recommendations for any individual or entity. Contact your banker, attorney, accountant, and/or tax advisor with regard to your individual situation. The author’s opinions do not necessarily reflect those of Wells Fargo Commercial Banking or any other Wells Fargo business.